Yahoo has settled a lawsuit alleging it aided China's prosecution of several dissidents, in a case that prompted criticism of the company for cooperating with an authoritarian government.

Terms were not disclosed in a joint court filing on Tuesday by attorneys for Wang Xiaoning, Yu Ling, Shi Tao and other unnamed parties and defendants Yahoo and its Chinese affiliates.

The plaintiffs agreed to withdraw their suit in the U.S. federal court for the Northern District of California after the families of Wang and Shi reached a deal with Yahoo, the Internet company said in a statement.

"Plaintiffs and defendants hereby jointly stipulate to dismissal with prejudice of all claims made in this action, based on a private settlement understanding among the parties," the court filing stated. Yahoo agreed to cover legal costs.

The suit, advanced by the Washington D.C.-based World Organization for Human Rights USA, maintained that Yahoo had benefited financially by working with Chinese authorities. China is the world's second-largest Internet market.

The advocacy group said that in settling the case, Yahoo and its co-founder and chief executive, Jerry Yang, had bowed to stinging criticism of the company at a televised congressional hearing held in Washington D.C. on November 6.

"While technologically and financially you are giants, morally you are pygmies," Rep. Tom Lantos, a California Democrat and chairman of the House Committee on Foreign Affairs, told Yang as he testified before Congress last week.

In a statement following the settlement, Lantos called the action by Yahoo long overdue. "It took a tongue-lashing from Congress before these high-tech titans did the right thing," the politician said, adding, "What a disgrace."

Yahoo said it was working to give financial, humanitarian and legal support to the families of the detainees. The Sunnyvale, California-based company has also set up a humanitarian relief fund to support other dissidents.

The World Organization for Human Rights said Yang had met with families of the jailed dissidents right after the hearing and agreed to the essential elements of the settlement. The settlement agreement is dated November 9 but was filed on November 13.

"We are committed to making sure our actions match our values around the world," Yang said in a statement. "After meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo and for the future."

Earlier this year, Wang's wife, Yu Ling, had charged that a Yahoo Chinese affiliate had turned over details to prosecutors that helped identify him to Chinese authorities.

"Plaintiffs were subjected to torture and cruel, inhuman or degrading treatment, including arbitrary, prolonged and indefinite detention, for expressing their free speech rights and for using the Internet to communicate about democracy and human rights matters," the original complaint said.

The suit named Yahoo, its Hong Kong subsidiary and Alibaba.com, China's largest e-commerce firm, as defendants. Yahoo holds a large minority stake in Alibaba.com.

Wang was sentenced to 10 years in prison for "incitement to subvert state power" after he e-mailed electronic journals advocating democratic reform and a multiparty system, as was business journalist Shi Tao, winner of the 2007 International Journalist's Golden Pen award.

"They are serving 10-year prison sentences as a direct result of the information Yahoo provided to Chinese authorities," the World Organization for Human Rights said in a statement following the settlement.

The human rights advocacy group said that while the identities of only four individuals arrested as a result of Yahoo's alleged actions have been made public, "it is suspected that hundreds more have been similarly affected."

Yahoo and other Internet companies maintain that as multinational companies, they must comply with the local laws of the countries in which they operate and said the U.S. government should do more to lobby for political prisoners.